Air New Zealand (ANZ) has rejected as flawed the New Zealand Commerce Commission's (NZCC) economic analysis of its proposed alliance with Qantas and dismissed as incorrect the bulk of the commission's draft conclusions.

In a no-holds-barred submission, the airline has lined up leading aviation economists in a last-ditch effort to get the proposal past the regulator. The submission comes as the airline's chief executive Ralph Norris warns that without the alliance the carrier will again require state intervention or risk collapse or takeover.

ANZ stands by its original arguments for alliance approval, outlined in the application that was rejected as anti-competitive by the NZCC in April.

The airline, supported by independent consultancy the Network Economics Consulting Group (NECG), rejects the findings of the commission's economic expert, Professor David Gillen, as being flawed and based on inappropriate assumptions. In the commission's latest economic analysis, Gillen concludes the alliance would result in a negative net benefit for New Zealand of NZ$195 million-$467 million ($113 million-$271 million) by year three. NECG supports ANZ's estimated benefits of NZ$189 million-NZ$256 million.

In response to NZCC concerns about lack of competition across the Tasman, ANZ says evidence shows Virgin Blue plans to enter the market within 12 months. ANZ has proposed conditions to encourage competition, including providing access to facilities and services, capacity and price caps, and limiting subsidiary Freedom Air's operations - but not selling Freedom Air, which Virgin Blue is demanding.

ANZ also argues that fifth-freedom airlines will continue to provide significant competition across the Tasman. These account for 25% of capacity on Auckland-Sydney and 44% on Auckland-Brisbane routes, and 16.7% and 22.1%, respectively, of actual origin and destination traffic, says the airline.

ANZ's analysis of its future without the alliance has not been released, but Norris is warning that the airline would collapse or be subject to a takeover and that state intervention would be inevitable. The New Zealand government had to step in and take an 82% share of the airline in September 2001 following the collapse of Ansett.

Source: Flight International